The layman's guide to AML/CTF Rules 2025: Part 7 - Correspondent banking

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Understanding Correspondent banking under Australia’s AML/CTF Rules 2025

Part 7 explains the due diligence you must do before and during a correspondent banking relationship that involves a vostro account, and what a senior officer must review and approve. It focuses on identifying, documenting and managing ML/TF/PF and other serious-crime risks.

Here’s the quick version:

• Before you start: Do a written risk assessment covering who owns/controls the respondent (and any parent), what the respondent does (products, channels, customers, expected transactions/services), where they operate, the quality of local AML/CTF regulation/supervision and their compliance history, whether their AML/CTF controls are appropriate, and any adverse public info. If payable-through accounts are involved, confirm the respondent will do initial and ongoing CDD on those customers and can give you their CDD info and verification data on request.
• Senior-officer sign-off: A senior officer must review the written assessment, be satisfied your AML/CTF program can manage the risks, and—if payable-through applies—be satisfied the respondent will perform CDD and can provide CDD info plus underlying verification data.
• Keep it current: While the relationship is live, keep assessing risk using the same factors, at risk-based intervals and at least every 2 years.

Useful links

• The Act
• The AML/CTF Rules 2025
• Explanatory Statement

Designated services 

• Tranche 1 - table 1
• Tranche 2- Schedules 3 and 6

Division 1 - Due diligence assessment for entry into correspondent banking relationship

7-1: Requirements for due diligence assessment

Before you enter a correspondent banking relationship that involves a vostro account, complete a due diligence assessment of ML/TF/PF and other serious-crime risks. In that assessment, consider:

• Who they are: ownership, control and management of the respondent and any parent.
• What they do: nature, size and complexity of the respondent’s business, including: products/services, delivery channels, customer types and what transactions/services you expect under the relationship.
• Where they operate: countries the respondent (and any parent with group-wide controls) operates in and/or is a resident of.
• Regulatory quality & history: strength of AML/CTF regulation/supervision in those countries and the respondent’s compliance track record.
• Controls: whether the respondent’s AML/CTF policies, procedures, systems and controls are appropriate.
• Reputation/adverse information: public information on investigations, regulatory actions, or criminal/civil matters involving the respondent or relevant group entities.
• If the relationship includes payable-through accounts (the respondent’s customers can access your vostro):
  • Confirm the respondent performs initial and ongoing CDD on those customers; and 
  • Confirm they can provide, on request, the customers’ CDD information and the independent verification datathey relied on.

7-2 Matters to which a senior officer must have regard before giving approval

Before you approving a correspondent banking relationship with another financial institution that will involve a vostro account, the senior officer must review the written due diligence assessment and be satisfied your AML/CTF program can manage the identified risks.

If payable-through accounts are involved, they must also be satisfied the respondent will do initial and ongoing CDD on those customers using the payable-through accounts and can provide you, on request, their CDD information and verification data.

Division 2—Requirements for ongoing due diligence assessments

7-3 Requirements for ongoing due diligence assessments

While the relationship is in place, you must keep assessing ML/TF, proliferation financing and other serious-crime risks, using the same set of considerations listed above in 7-1 ( 7‑1(3)(a) to (g) in the Rules).

7-4 Timing of ongoing due diligence assessments

Do these assessments at risk-based intervals (consider overall risk level and any material changes) and, in any case, at least every 2 years.